What we're looking at:
To achieve better results from our products, we constantly monitor many signals that can tell us how likely the markets are to be going through a correction or bottoming. We use simple indicators such as moving averages, especially longer-term ones. These can be, for example, the 200-day MA (moving average), which we know is followed by the biggest players.
We also use simple "patterns" or groupings of charts that give us an idea of potential market moves. We consider the rising wedge and falling wedge to be the most important, plus head & shoulders. These are simple patterns that repeat with some regularity and can be used to predict how the market is likely to develop.
Other values we monitor are the market's overbought and oversold levels using the RSI. For these values, we consider it most important to look for divergences, which on long intervals often indicate whether the market is moving healthily or not.
The combination of all these indications often helps us in getting a pretty good picture of where we are and how to react to the situation.
Example of Rising Wedge plus Divergence, the current chart from the Nasdaq 100 ETF - QQQ:
Explanation:
A rising wedge is a bearish chart composition where the market moves in an upward trend between two lines before the lower one breaks and the decline comes.
A bearish divergence is a condition where the market is breaking new local highs but the RSI indicator is showing lower readings.
On the nature of our products:
We have to keep in mind that the nature of our product is long term, i.e. the investment horizon is 5 years or more. Therefore, market fluctuations may not excite us in principle if our fundamental thesis is correct. For the most part, we will always remain invested as we are and there is no reason to panic. We follow a simple rule that holds true in long-term investing - the less you do, the more you make.
What already plays a role and why we are interested in the values mentioned above is that they allow us to better adjust the size of our positions and react well in reverse during pullbacks to maximize potential profits or, conversely, limit risks.